Calculating the Wage Subsidy
How is the wage subsidy calculated for claim periods 1 to 4?
The amount of the wage subsidy for a claim period in periods 1 to 4 is the total of the following amounts in respect of the claim period (note that there is no overall limit on the wage subsidy amount that an eligible employer may claim):
I. Total of all amounts, each of which is for an eligible employee in respect of a week in the claim period, equal to the greater of
a. the least of
i. 75% of eligible remuneration paid to the eligible employee in respect of that week,
ii. $847, and
iii. if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and
b. the least of
i. the amount of eligible remuneration paid to the eligible employee in respect of that week,
ii. 75% of baseline remuneration in respect of the eligible employee determined for that week, and
iii. $847;
II. Total of the employer contributions to Employment Insurance (EI), the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP), and the Quebec Parental Insurance Plan for an eligible employee for each week in the claim period throughout which week that employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee (see Note 1 below)
Less:
III. Total of all amounts claimed or intended to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and
IV. Total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act (see Note 2 below).
Note 1: In general, for the amount in (II), an eligible employee will be considered to be on leave with pay throughout a week if that employee is remunerated by the eligible employer for that week but does not perform any work for the employer in that week. This amount in (II), would not be available for eligible employees that are on leave with pay for only a portion of a week. In addition, regular rules will apply in calculating the employer contributions in respect of that employee.
Note 2: On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.
How is the wage subsidy calculated for claim periods 5 and 6?
The amount of the wage subsidy in respect of an eligible employee for claim periods 5 and 6, depends on three factors - the revenue reduction percentage in the claim period, the employer’s three-month average revenue drop (top-up revenue reduction percentage), and whether the eligible employee is on leave with pay in respect of that week in the claim period or is not on leave with pay.
Depending on whether the eligible employee is on leave with pay (see II below), or is not on leave with pay (see I below) in respect of a week in the claim period, the wage subsidy is the total of the following amounts in respect of the claim period (there is no overall limit on the wage subsidy amount that an eligible employer may claim):
I. Where an eligible employee is not on leave with pay in respect of a week in the claim period 5 or 6, the wage subsidy in respect of the week is the greater of 1. and 2. where:
1. is an amount equal to:
a. $0, if the revenue reduction percentage of the eligible employer for the claim period is less than 30%; and
b. if the revenue reduction percentage is equal to or greater than 30%, an amount equal to the greater of :
i. the least of
A. 75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
B. $847, and
C. if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and
ii. the least of
A. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
B. 75% of baseline remuneration in respect of the eligible employee determined for that week, and
C. $847;
2. is the amount determined by the result of:
the sum of the eligible employer’s base percentage for the claim period and the eligible employer’s top-up percentage for the claim period, multiplied by the least of the following amount:
a. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week;
b. $1,129; and
c. if the eligible employee does not deal at arm’s length with the eligible employer in the claim period, the baseline remuneration in respect of the eligible employee determined for that week.
II. Where an eligible employee is on leave with pay in respect of a week in the claim periods 5 or 6, the amount of wage subsidy in respect of the week in the claim period is:
1. $0, unless:
a. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or
b. the top-up percentage of the eligible employer for the claim period is greater than 0%, and
2. where any of the two conditions in 1. above are met, an amount equal to the greater of:
i. the least of
A. 75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
B. $847, and
C. if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and
ii. the least of
A. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
B. 75% of baseline remuneration in respect of the eligible employee determined for that week, and
C. $847;
III. In respect of each week in the claim period throughout which the employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee:
1. $0, unless:
a. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or
b. the top-up percentage of the eligible employer for the claim period is greater than 0%, and
2. where any of the two conditions in 1. above are met, the total of the employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan for an eligible employee.
Less:
IV. Total of all amounts claimed or intended to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and
V. Total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act (see Note below).
Note: On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.
How is the wage subsidy calculated for claim periods 7 to 13?
The amount of the wage subsidy for a claim period in periods 7 to 13 is the total of the following amounts (note that there is no overall limit on the wage subsidy amount that an eligible employer may claim):
I. Where an eligible employee is not on leave with pay, in respect of a week in the claim period, the amount determined by the result of the sum of the eligible employer’s base percentage and the eligible employer’s top-up percentage for the claim period, multiplied by the least of the following amount:
a. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week;
b. $1,129; and
c. if the eligible employee does not deal at arm’s length with the eligible employer in the claim period, the baseline remuneration in respect of the eligible employee determined for that week.
II. Where an eligible employee that is on leave with pay in respect of a week in the claim period, the least of:
a. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
b. an amount determined by regulation in respect of the eligible employer for the claim period (there is no such amount currently),
c. $0, if
i. the eligible employee does not deal at arm’s length with the eligible employer in the claim period, and
ii. the baseline remuneration of the eligible employee for that week is $0, and
d. $0, unless
i. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or
ii. the top-up percentage of the eligible employer for the claim period is greater than 0%;
III. For each week in the claim periods 7 or subsequent periods throughout which week the employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee:
1. $0, unless:
i. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or
ii. the top-up percentage of the eligible employer for the claim period is greater than 0%,
2. where any of the two conditions in 1. above are met, the amount equal to the total of the employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan for an eligible employee.
Less:
IV. Total of all amounts claimed or intended to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and
V. Total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act*.
Note
For Claim Periods 7 and 8 the amount is the greater of:
1. the least of:
a. 75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
b. $847, and
c. If the eligible employee does not deal at arm’s length with the eligible employer in the claim period, nil, and
2. The least of:
a. The amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,
b. 75% if baseline remuneration in respect of the eligible employee determined for that week, and
c. $847
For Claim Periods 9 and 10 the amount is the greater of
1. $500, and
2. The lesser of
a. 55% of baseline remuneration in respect of the eligible employee determined for that week, and
b. $573
For Claim Periods 11 to 13 the amount is the greater of
1. $500, and
2. The lesser of
a. 55% of baseline remuneration in respect of the eligible employee determined for that week, and
b. $595
*On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.
When is an employee considered to be on leave with pay?
An eligible employee will generally be considered to be on leave with pay throughout a week if that employee is remunerated by the eligible employer for that week but does not perform any work for the employer in that week. Generally, this will only apply to employees on paid furlough (that is, employees that have been temporarily laid off with pay). An employee will not be considered to be on leave with pay for purposes of the wage subsidy if they are on a period of paid absence, such as vacation leave, sick leave, or a sabbatical. An employee would not be on leave with pay in situations where the employment relationship has been severed, such as when the employer pays wages in lieu of termination notice.
Additionally, an eligible employee will not be on leave with pay for a week if the employee continues to perform any of their employment duties during the week, including only minimal duties.
Amounts received that are funded by another government program
If an eligible employer has received or is reasonably expected to receive an amount as a subsidy or other assistance based on the salary, wages or other remuneration paid to an eligible employee that would otherwise be eligible for the wage subsidy, the amount of the government subsidy or assistance does not reduce the amount of the eligible remuneration used to calculate the wage subsidy for that employee.
However, if the government entity providing the subsidy pays the eligible employee directly, the eligible employer would only be able to claim, for the wage subsidy, the amount of eligible remuneration the employer actually paid to the employee.
The amount that may be claimed by an eligible employer for the wage subsidy is reduced by amounts claimed under the 10% Temporary Wage Subsidy for Employers and by amounts received by the employee as a work-sharing benefit under the Employment Insurance Act.
Base wage subsidy and top-up wage subsidy for the claim periods 5 to 13
Effective period 5 to 13 the wage subsidy calculation consists of two parts:
- a base portion of the wage subsidy (base wage subsidy) available to all eligible employers that are experiencing a decline in qualifying revenues, with the wage subsidy amount varying depending on the scale of qualifying revenue decline; and
- a top-up portion of the wage subsidy (top-up wage subsidy), for those eligible employers, of up to an additional 25% for claim periods 5 to 10 and of up to 35% for claim periods 11 to 13.
The base portion of the wage subsidy consists of a specified base percentage applicable to the amount of eligible remuneration paid to the eligible employee by the eligible employer for a claim period, on remuneration of up to $1,129 per week. The specified base percentage would vary depending on the level of decline in qualifying revenue (see Table below). The base percentage gradually reduces from a maximum of 60% in claim periods 5 and 6 (July 5 to August 29) to 50% in claim period 7 (August 30 to September 26) to 40% in claim periods 8 to 13 (September 27 to March 13).
While a maximum base wage subsidy applies to eligible employers with a revenue reduction percentage of 50% or more, eligible employers with a revenue reduction of less than 50% would be eligible for a lower base wage subsidy, with a phase-out measure when the decline in revenue is between a 50% revenue drop and no decline of revenue (see below).
For revenue reduction of less than 50%, the base percentage is determined for each of claim periods 5 to 13 by multiplying the revenue reduction percentage (described below) by a factor that declines during each claim period (except between periods 5 and 6).
Structure of the base wage subsidy
Periods 5 and 6
- base percentage of 60%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
- in any other case, 1.2 multiplied by the revenue reduction percentage;
Period 7
- base percentage of 50%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
- in any other case, 1 multiplied by the revenue reduction percentage;
Period 8 to 13
- base percentage of 40%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
- in any other case, 0.8 multiplied by the revenue reduction percentage;
Period 9
- base percentage of 20%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
- in any other case, 0.8 multiplied by the revenue reduction percentage; and
- for a prescribed period after claim period 13, a percentage determined by regulation in respect of the eligible employer (currently there is no percentage determined by regulation after claim period 13).
Revenue reduction percentage
The revenue reduction percentage, of an eligible employer for a claim period, means the result (expressed as a percentage) of the formula (1 − A/B), where:
- A is the eligible employer’s qualifying revenue for the current reference period for the claim period; and
- B is the eligible employer’s qualifying revenue for the prior reference period for the claim period – or, if the prior reference period is January and February 2020, the amount determined by the formula (see note below), or a period prescribed by regulation in respect of the eligible employer for the claim period (currently there is no period prescribed by regulation).
If the above formula results in a lower revenue reduction percentage in respect of an eligible employer for a particular claim period than for the immediately preceding claim period, then the revenue reduction percentage in respect of the eligible employer for the particular claim period is deemed to be equal to its revenue reduction percentage for the immediately preceding claim period.
Note: the formula is: 0.5xAx(B/C) where
A= qualifying revenues for the months of January and February of 2020
B= number of days in January and February 2020
C= number of days in January and February of 2020 during which the eligible employer was carrying on business —or otherwise carrying on its ordinary activities.
Maximum weekly benefit per employee |
$677.40 (60%x$1,129) |
$677.40 (60%x$1,129) |
$564.50 (50%x$1,129) |
$451.60 (40%x$1,129) |
$225.80 (20%x$1,129) |
Revenue reduction (RR) |
Base percentage |
Base percentage |
Base percentage |
Base percentage |
Base percentage |
50% and over |
60% |
60% |
50% |
40% |
20% |
Note: Transition rules- Under the safe harbour rule for claim periods 5 and 6, if the eligible employer has a revenue reduction of 30% or more, then the employer is entitled to a wage subsidy not lower than the amount calculated under the rules that were in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay (see Q20-03) for that week.
The overall wage subsidy percentage would be equal to the base percentage plus the top-up percentage.
Top-up wage subsidy for claim periods 5 to13
Under the general year-over-year approach, for claim periods 5 to 7, the top-up portion of the wage subsidy is calculated based on the revenue drop experienced when comparing the average monthly qualifying revenues of the eligible employer in the last three calendar months that ended prior to the current reference period for the claim period, to the average monthly qualifying revenues for the same months in the prior year. For claim periods 8 to 10, the top-up wage subsidy is based on the greater of the revenue reduction as calculated above (three month revenue reduction test) and the revenue reduction for the claim period (one month revenue reduction test). For claim periods 11 to 13, the top-up wage subsidy is based solely on the one month revenue reduction test for the claim period.
Under the alternative approach, for claim periods 5 to 7, an eligible employer’s top-up wage subsidy would be determined based on the revenue drop experienced when comparing average monthly qualifying revenue in the last three calendar months that ended prior to the current reference period for the claim period, to the average monthly revenue in January and February 2020. For claim periods 8 to 10, it will be based on the greater of the percentage calculated as above (three month revenue reduction test) and the revenue reduction percentage (one month revenue reduction test) of the eligible employer for the claim period. For claim periods 11 to 13, the top-up wage subsidy is based solely on the one-month revenue reduction test for the claim period.
Top-up revenue reduction percentage
For Claim Periods 5 to 7 (three month revenue reduction test)
The top-up revenue reduction percentage of an eligible employer for claim periods 5 to 7, means the result, expressed as a percentage, of:
(1 - A/B) where
- A is the average monthly qualifying revenue of the eligible employer for the last three calendar months that ended prior to the current reference period for the claim period;
- B is the average monthly qualifying revenue of the employer for:
- (a) if the prior reference period for the claim period is January and February 2020, then January and February 2020, and
- (b) in any other case, the last three calendar months that ended before the prior reference period for the claim period.
For Claim Periods 8 to 10 (safe harbour rule for top-up wage subsidy calculation)
The top-up revenue reduction percentage of an eligible employer for claim periods 8 to 10 is the greater of:
- The result (expressed as a percentage) of the formula described above (three months revenue reduction test), and
- Its revenue reduction percentage for the claim period (one month revenue reduction test)
For Claim Periods 11 to 13 (one month revenue reduction test)
The top-up revenue reduction percentage of an eligible employer for claim periods 11 to 13 is equal to its revenue reduction percentage for each of those claim periods.
Top-up percentage
For claim periods 5 to 10, the top-up percentage, of an eligible employer for a claim period, means the percentage determined by regulation for the claim period (currently there is none) or, if there is no percentage determined by regulation for the claim period, the lesser of 25% and the percentage determined by the formula:
1.25 × (employer’s top-up revenue reduction percentage for the claim period − 50%)
If the top-up revenue reduction percentage of the eligible employer is equal to or less than 50%, the employer will not be eligible for the top-up wage subsidy.
As with the base percentage, the top-up percentage applies to eligible remuneration of up to $1,129 per week.
Table: To-up Percentage Examples for Claim Periods 5 to 10
70% and over |
25% |
1.25 x (70% - 50%) = 25% |
65% |
18.75% |
1..25 x (65% - 50%) = 18.75% |
60% |
12.5% |
1.25 x (60% - 50%) = 12.5% |
55% |
6.25% |
1.25 x (55% - 50%) = 6.25% |
The overall wage subsidy percentage would be equal to the top-up percentage plus the base percentage
For claim periods 11 to 13, the top-up percentage of an eligible employer for a claim period, means the lesser of 35% and the percentage determined by the formula:
1.75 × (employer’s top-up revenue reduction percentage for the claim period − 50%)
If the top-up revenue reduction percentage of the eligible employer is equal to or less than 50%, the employer will not be eligible for the top-up wage subsidy.
As with the base percentage, the top-up percentage applies to eligible remuneration of up to $1,129 per week.
Table: Top-up Percentage Examples for Claim Periods 11 to 13
70% and over |
35% |
1.75 x (70% - 50%) = 35% |
65%
|
26.25%
|
1.75 x (65% - 50%) = 26.25% |
60% |
17.5% |
1.75 x (60% - 50%) = 17.5% |
55%
|
8.75%
|
1.75 x (55% - 50%) = 8.75%
|
The overall wage subsidy percentage would be equal to the top-up percentage plus the base percentage.
* For claim periods 11 to 13, an eligible employer’s top-up revenue reduction percentage is equal to its revenue reduction percentage for the period.
Table: Combined base portion (BP) and top-up portion of the wage subsidy percentages for claim periods 5 to 13
Maximum weekly benefit per employee |
$959.65 (85%x $1,129)
|
$959.65 (85%x $1,129)
|
$846.75 (75%x $1,129)
|
$733.85 (65%x $1,129)
|
$508.05 (45%x $1,129)
|
Revenue reduction (RR) in the current 1-month reference period |
|
|
|
|
|
50% and over |
85% (60% BP + *6 25% top-up)
|
85% (60% BP + *6 25% top-up)
|
75% (60% BP + *6 25% top-up)
|
65% (60% BP + *6 25% top-up)
|
45% (60% BP + *6 25% top-up)
|
*6 - Maximum top-up subsidy of 25% is available when the top-up revenue reduction percentage (see Q20-3) for the claim period is 70% or more.
*7 - Assumed an RR of 20% for illustrative purposes only.
Note: Transition rules- Under the safe harbour rule for claim periods 5 and 6, if the eligible employer has a revenue reduction of 30% or more, then the employer is entitled to a wage subsidy not lower than the amount calculated under the rules that were in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay for that week.